Latest news with #CPPIB
Wall Street Journal
3 days ago
- Business
- Wall Street Journal
EOG Resources to Buy Encino Acquisition Partners for $5.6 Billion
EOG Resources EOG -0.52%decrease; red down pointing triangle has agreed to buy Encino Acquisition Partners for $5.6 billion, extending its acreage in Ohio's Utica Shale. The oil-and-gas producer said Friday that it reached an acquisition deal with Encino Energy and the Canada Pension Plan Investment Board, which jointly established the Houston-based company in 2017 to acquire U.S. oil and gas assets.
Globe and Mail
3 days ago
- Business
- Globe and Mail
Overstaffed, overpaid and underperforming, the CPP investment fund is in need of a sharp course correction
This time they waited until page 41 to admit it. As with most things at the Canada Pension Plan Investment Board, its annual reports have become increasingly bloated over the years. Once, the organization responsible for investing Canadians' public pension savings reported on its activities each year in a relatively straightforward fashion. The typical CPPIB annual report in those days was a relatively restrained 15,000 to 20,000 words. That was before 2006, when the CPP's surplus funds were still invested passively, that is in a way designed to track the broad market indexes. In that year, the fund switched to active management: picking individual stocks, bonds and other assets in an attempt to beat the market. Since then the fund's annual reports have become, essentially, extended advertisements for active management. They now run to more than 80,000 words: page after page of dense, jargon-filled and numbingly repetitive prose on the many arcane strategies and reams of research the fund has deployed in the quest to 'add value' – to earn a higher return, that is, than it would have had it just stuck to investing in the indexes. CPPIB CEO expects 'roller-coaster' year for investors after 9.3 per cent return in past fiscal year To be sure, the fund's managers will concede, this approach is more costly – much more costly. Where 20 years ago the CPPIB had just 150 employees and total costs of $118-million, it now has more than 2,100 employees and total expenses (not including taxes or financing costs) in excess of $6-billion. And yet, for all its eagerness to explain how it invests your money – the process – the fund is rather less keen to go into the results. This year's report is no exception. To be sure, there, in large type, is the headline figure: a rate of return of 9.3 per cent in the fiscal year ending March 31. As in previous years, the fund's managers are quick to congratulate themselves on this achievement. 'This year, we delivered solid returns for the Fund,' writes the fund's president, John Graham, crediting 'the disciplined execution of a forward-thinking strategy, by a high-performing team.' Now, 9.3 per cent certainly sounds impressive, unless you recall that equity markets generally were up wildly last year. The U.S. market returned more than 30 per cent in calendar 2024; Canada's, more than 20 per cent; other developed countries, an average of 12 per cent. Bonds earned much less, of course, but with any reasonable mix of stocks and bonds it would have been like falling off a log to earn 9.3 per cent. In fact, the CPP's traditional benchmark portfolio, a mix of 85 per cent stocks and 15 per cent bonds, earned 13.4 per cent last year – half again as much as the fund's team of disciplined, forward-thinking high-performers were able to generate. That's what you'd get just by buying the averages, or – what is the same thing – if you'd just picked stocks at random. That, however, is not the point. Any one year you could put down to bad luck. But the CPP fund didn't just underperform the indexes last year. It has done so, on average, ever since it switched to active management. That's the admission you find buried on page 41 (it was on page 39 last year): since fiscal 2007, 'the Fund generated an annualized value added of negative 0.2 per cent.' Compound that 0.2 per cent annual shortfall over 19 years, and it adds up to more than $70-billion in forgone income, on assets that now total $714-billion. The fund's managers have spent nearly two decades and a total of $53-billion trying to beat the market, only to produce a fund that is nearly 10-per-cent smaller than it would be had they just heaved darts at the listings. That's not a comment on the skills of its employees. It's a comment on the strategy. The best managers in the world regularly underperform the market, especially after costs are taken into account – two thirds in any given year, nearly all of them over longer time frames. It's one of the most well-studied phenomena in the literature. Which is why many large pension funds have given up trying, switching from active to passive management. Still, if the fund's managers can't be blamed for this performance, neither should they be rewarded for it. Which is the other scandal here: notwithstanding the fund's indifferent returns, everyone there is making out like bandits – not just in the executive suite, whose five highest-paid inhabitants earned nearly $5-million apiece on average in salaries and benefits last year, but across the organization, whose 2,100-plus employees were compensated to the tune of more than $500,000 on average. CPP Investments is an organization that is literally out of control. It is long past time it was reined in and given new directions.
National Observer
26-05-2025
- Business
- National Observer
Pension fund's climate decision makes all Canadians more vulnerable
Canadians may trust their banks, but when it comes to their pensions, it's closer to the faith of religious devotees. Irrespective of whether they take an active role in managing their pensions, few Canadians entertain the possibility their pension might not be there when they retire. There's a good reason for this — Canadian pensions are generally well-regulated, and the government takes an active role in their management. For this reason, many Canadians assume pension funds are ethically invested, and fund managers are doing their due diligence. We might soon be in for a very rude awakening. Recent research by Ortec Finance suggests that Canadian pension funds are second only to those in the United States in terms of their vulnerability to the climate crisis. Their modelling suggests that climate change could erode Canadians' pension returns by as much as 44 per cent in the next 25 years. Canadian pension funds have a fiduciary responsibility to remain solvent and stable, which is why they need to plan to address the financial challenges posed by climate change. They also need to refrain from exacerbating the underlying causes of it. And among all public and private pensions in Canada, no one is more responsible for leading by example than the Canada Pension Plan Investment Board (CPPIB), the Crown corporation that manages the Canada Pension Plan (CPP). Unlike other pensions, both public and private, practically everyone is entitled to CPP, and most of us will depend on it in our retirement. One might presume that, for this reason, the CPPIB would be among the world's most conservative and risk-averse pension fund managers. After all, it manages $714.4 billion on behalf of 22 million Canadians, and is among the largest pension funds in the world. And yet, it would seem that the CPPIB has quietly abandoned its net-zero commitments made initially in 2022. According to the CPPIB's 'Approach to Sustainability' FAQ section: Recent legal developments in Canada have introduced new considerations around how net-zero commitments are interpreted. In particular, there is increasing pressure to adopt standardized emissions metrics and interim targets (…) forcing alignment with rigid milestones could lead to investment decisions that are misaligned with our investment strategy. To avoid that risk (…), we have made a considered decision to no longer maintain a net-zero by 2050 commitment. Many Canadians assume pension funds are ethically invested, and fund managers are doing their due diligence. We might soon be in for a very rude awakening. The CPPIB's justification makes no sense. Far from being a 'rigid milestone,' net-zero by 2050 — first articulated as a global goal at the Paris Climate Conference in 2015 — was widely criticized for being 'too little, too late.' Moreover, the CPPIB's opposition to adopting 'standardized emissions metrics' and 'interim targets' seems odd for a pension fund whose job it is to meticulously scrutinize its investments and the general investment climate to ensure its long-term viability. If the investment board is not concerned about clear metrics and timely reporting, who is? And as far as 'misalignment' is concerned, it's worth considering that CPPIB is moving against the grain among Canada's major pension funds. According to Shift Action for Pension Wealth & Planet Health — a Canadian charitable organization that works to protect the climate as much as our pensions — seven of Canada's largest pensions have maintained their net-zero commitments, despite facing the same 'recent legal developments' (Shift Action and some other critics believe this is in reference to anti-greenwashing amendments made to the Competition Act last year). In a statement, Shift Action indicated its belief this could be interpreted as a tacit admission CPPIB was aware its net-zero commitments may not have been in line with international standards. If this is the case, the Canadian public deserves to know not only why the CPPIB has abandoned its net-zero commitments, but further, why it didn't take the amendments to the Competition Act as an opportunity to improve and specify those commitments. Furthermore, it's ironic that the CPPIB would argue it's abandoning its net-zero goals out of an apparent concern for risk, when the whole point of a 35-year transition toward carbon neutrality was to minimize the risks associated with climate change in the most incremental and business-friendly way possible. Does the investment board think the investment climate is going to become less risky as we move deeper into the climate crisis? Does it think abandoning already unambitious net-zero goals will have the effect of increasing market stability? Does it not realize this retreat from even modest carbon-neutral ambitions will likely have an unintended trickle-down effect on other Canadian pension funds? If the CPPIB is giving up, why should anyone else bother? According to Shift Action, Canada's largest pensions manage a combined $2.5 trillion. Their investment decisions play a big role in determining whether there's capital for renewables, energy transition, and decarbonization, or continued investment in the very fossil fuels that are undermining economic stability. It's not just all the current and potential recipients of CPP who deserve an unambiguous explanation for their actions; it has a responsibility to be a good corporate citizen and shine a light forward for all other pension funds — not to mention the business community more broadly. That a public corporation with such an obvious duty to taxpayers as much as other pension funds would so willingly shirk its responsibilities is as unacceptable as it is unconscionable. It isn't, however, surprising. Shift Action publishes an annual Canadian Pension Climate Report Card, and the CPPIB was among the very worst performers in 2024, earning the second to lowest overall grade. Shift Action noted that the CPPIB continues to make investments in the fossil fuel sector, despite scientific consensus on the root cause of climate change, as much as a growing economic consensus that Canada's days as an energy exporter are numbered. The CPPIB — like all pension fund managers — has a responsibility to do its due diligence, but this is unlikely to occur in a country in which politicians and much of the establishment media and business class are happy to parrot industry-approved narratives forecasting sunny days ahead for fossil fuels. This is neither realistic nor responsible.
Mint
23-05-2025
- Business
- Mint
CPPIB's India portfolio touches $22 billion in FY25
The Canada Pension Plan Investment Board (CPPIB), operating as CPP Investments, saw its India portfolio touch a record C$30 billion (about $22.7 billion) in net assets in 2024-25, showed its latest annual report. Its key investments of the fiscal year were $100 million (C$137 million) in private equity fund Kedaara Capital's new fund and an undisclosed amount in venture capital firm Accel's eighth fund. It also infused $100 million (C$137 million) alongside PE firm PAG for about a 14% stake in the combined entity of Manjushree Technopack and Pravesha. It invested another $100 million (C$137 million) alongside EQT Private Capital Asia for a 5% stake in Perficient Inc., $8 million (C$11 million) in edtech startup Eruditus, and nearly $244 million (C$335 million) in National Highways Infra Trust. The investment company had assets under management (AUM) worth C$28 billion (about $20.3 billion) in India in 2023-24. It also made handsome gains during the year. It earned nearly $220 million (C$298 million) in net proceeds from the sale of its 6% stake in logistics company Delhivery, $52 million (C$71.5 million) in net proceeds from its stake sale in One Paramount 1, and an undisclosed return from a partial stake sale in National Stock Exchange of India. Its credit investments in India also crossed over $800 million (C$1.1 billion), including a $353 million (C$486 million) transaction in the extension of a senior secured loan to business outsourcing company Straive; $250 million (C$344 million) in a loan facility to Cohance Lifesciences and Suven Pharma, combined and owned by Advent International; and a $185 million (C$255 million) investment into an India rupee dominated debt facility for the US-based Enfinity Global. Overall, it ended the fiscal year with net assets of C$714.4 billion across all geographies, compared to C$632.3 billion last fiscal year. The C$82.1 billion increase in net assets consisted of C$59.8 billion in net income, one of its highest in history, and the remaining in net transfers. 'The fund's performance during the fiscal year was strong, with all investment departments contributing to one of the highest levels of annual net income in our history, despite market headwinds in the final quarter,' said its president and chief executive, John Graham. The fund generated a net return of 9.3% for the fiscal year. With strong returns across multiple asset classes, the strengthening of other countries against the Canadian dollar was a significant contributor to the investment firm's gains through the year. CPP Investments noted that public equities, especially in the US and China, delivered gains despite geopolitical and trade-related headwinds in the March quarter. Other investments in private equities, infrastructure, and credit, which benefited from tightening credit spreads, also contributed positively to the returns. While CPP does not disclose individual country investments by the year, the US was its highest-performing market, with a net return of 12.7% year-on-year, followed by Europe (8.8%), Canada (8.1%), and Asia Pacific (7.3%). However, it booked a loss of 1.6% in Latin America due to a weak Brazilian real against the Canadian dollar and losses in Brazilian public equity investments, particularly in the energy sector. It started operations in India in 2009 with its inaugural investment in Multiples Equity and opened its first office in Mumbai six years later.
Bloomberg
23-05-2025
- Business
- Bloomberg
TD Shows Canada's Banks Are Getting Ready for Economic Trouble
Welcome to Bay Street Edition, our weekly newsletter devoted to what's happening in Canadian finance, covering strategy, deals, people moves and economics. I'm Christine Dobby, Bloomberg's Toronto-based banking reporter, and you'll find me in your inbox every Friday. This week, we're talking about TD's earnings report and what it says about other banks' results next week, sticky inflation and where CPPIB is investing all its money (hint: it's not at home). Plus: Canada Goose's supply-chain advantage.
